Four former directors of medical equipment supplier accept liability for €27m losses

Liquidator seeks disqualifications for members of same family, court told

The Four Courts. Four former directors of a medical equipment supplier have agreed to accept liability for losses totalling €27 million, the High Court has heard.

The Four Courts. Four former directors of a medical equipment supplier have agreed to accept liability for losses totalling €27 million, the High Court has heard.

 

Four former directors of a medical equipment supplier have agreed to accept liability for losses totalling €27 million, the High Court has heard.

In an agreed settlement of terms, liquidator George Maloney is seeking director disqualifications for four former directors of Eurosurgical Limited, all of whom are related.

While accepting liability of €27 million, Ray (senior), Alan, Gary and Alison Kane have agreed to consent to judgment for €18 million, Andrew Fitzpatrick SC, for Mr Maloney, told the court.

Records

Mr Fitzpatrick said it is accepted by the respondents that there was a “deliberate failure” by them to maintain accurate stock records, an accurate creditors’ ledger or bank transactions apart from those relating to customer receipts.

Furthermore, he said it is agreed the four Kanes failed to account properly for significant tax liabilities and that the company understated its liabilities to the Revenue Commissioners for PAYE, PRSI, USC, VAT and corporation tax.

* The company, which once had a registered office on Beaumont Avenue, Churchtown, Dublin 14, featured in a 2015 RTÉ Investigations Unit programme about alleged breaches of hospital procurement procedures.

The High Court appointed Mr Maloney as liquidator in June 2016.

Mr Fitzpatrick said the liquidator also seeks on consent director disqualifications of at least 15 years for Ray Kane (senior), at least 12 years for Mr Kane’s sons Alan and Gary, and a minimum of seven years for Mr Kane’s daughter Alison.

Ray Kane (senior) was a director of the company from 1987 to the date of the liquidation order and a 64.71 per cent shareholder. Alan and Gary Kane each owned 17.65 per cent of the shares, with Alan serving as a director from 2000 to July 2015 and Gary serving as a director from 2002 to the date of the liquidation order. Alison Kane served as a director from October 2008 to the date of the order.

Debts

The liquidator is also asking the court, to the extent it deems appropriate, to make the four respondents personally liable on a joint and several basis for Eurosurgical’s debts.

The order is being sought on the basis that the respondents failed to ensure the company complied with accounting obligations under the Companies Act 2014, and because this led to the company being unable to pay all of its debts.

A statement of facts agreed between the parties say a series of issues and transactions identified during Mr Maloney’s investigation into the company’s affairs were a “cause for serious concern”.

Among the facts agreed is that these former directors caused or permitted client accounts operated by Actons Solicitors, the former law firm for the company and the respondents, to be used to extract substantial sums of money from the company.

An amount of €3.25 million of company funds were paid into the Actons client account linked to Ray Kane (senior), and he had no entitlement to receive this money, which has not been returned, it is agreed.

It is also accepted by the parties that the respondents caused or allowed the company to record certain payments as “FX Drafts”, which represented payments to its bank for the preparation of drafts for the purposes of paying foreign suppliers.

The company obtained large sums of cash as part of these transactions and there was a significant amount of withdrawals of a non-business nature, it is agreed.

Mr Maloney’s investigation found that “FX Drafts” totalling some €9.7 million took place during the review period, and a substantial portion were not in fact bona fide purchases, but payments for the benefit of the company directors and connected parties, it is agreed.

Payments

It is further agreed that payments to directors and staff materially exceeded the net pay recorded in the P35 submissions, with a difference of €1.35 million across 10 years. A company account entitled “Musgrave’s Cash and Carry” with expenditure of €234,000 was “in truth personal expenditure”, it is accepted by the parties.

It is also agreed that Mr Maloney identified evidence of a number of payments for various items on behalf of people working in procurement or similar roles. The respondents further caused or permitted the company to pay for directors’ personal travel and gifts to customer procurement personnel, according to the agreed facts.

Also agreed is that the respondents caused or permitted the transfer of company funds totalling €130,950 to Alan Kane to assist in his purchase of a property in Enniskerry, Co Wicklow. Funds totalling €144,300 were transferred to Gary Kane in connection with the acquisition of a property in Delgany, Co Wicklow, it is agreed.

Dispute resolution consultant Terry Leggett said his client Ray Kane (senior) has accepted the agreed facts and the minimum disqualification period. He said his client cooperated with the liquidator as best he could and was adjudicated bankrupt six months after the liquidation.

Counsel on behalf of Alan, Gary and Alison Kane asked the judge not to extend the disqualifications beyond the minimum agreed terms. He said Gary and Alison Kane have agreed to pay €125,000 between them, while Alan Kane is at an advanced stage of bankruptcy.

Mr Justice Senan Allen said on Thursday that he would reserve his judgment until the new year.

* This article was edited on December 3rd, 2021